Matter of Public Service Electrice & Gas
| Decision Date | 18 May 2001 |
| Docket Number | A-139 |
| Citation | 771 A.2d 1163 |
| Parties | (N.J. 2001) IN THE MATTER OF PUBLIC SERVICE ELECTRIC AND GAS COMPANY'S RATE UNBUNDLING, STRANDED COSTS AND RESTRUCTURING FILINGS IN THE MATTER OF THE PETITION OF PUBLIC SERVICE ELECTRIC AND GAS COMPANY FOR A BONDABLE STRANDED COST RATE ORDER IN ACCORDANCE WITH CHAPTER 23 OF THE LAWS OF 1999 , TO AUTHORIZE THE IMPOSITION OF A NONBYPASSABLE TRANSITION BOND CHARGE, TO AUTHORIZE THE SALE OF BONDABLE TRANSITION PROPERTY, THE ISSUANCE AND SALE OF NOT TO EXCEED $2.525 BILLION AGGREGATE PRINCIPAL AMOUNT OF TRANSITION BONDS BY A FINANCING ENTITY TO RECOVER PETITIONER'S BONDABLE STRANDED COSTS, AND THE APPLICATION OF TRANSITION BOND PROCEEDS TO RETIRE OUTSTANDING UTILITY DEBT, EQUITY OR BOTH, AND TO APPROVE THE FORMULA FOR THE CALCULATION AND ADJUSTMENT OF THE TRANSITION BOND CHARGE AND MARKET TRANSITION CHARGE AND MARKET TRANSITION CHARGE- TAX RELATED THERETO. /140/ 147 September Term 1999 |
| Court | New Jersey Supreme Court |
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Plaintiffs in this case have challenged the Final Decision and Order (Final Order) issued by the Board of Public Utilities (BPU) in respect of Public Service Electric and Gas Company's (PSE&G) rate unbundling, stranded cost, and corporate restructuring filings. Also at issue is BPU's Bondable Stranded Costs Rate Order (BSCRO) issued in response to PSE&G's petition to securitize its recovery-eligible stranded costs.
BPU issued a Final Report in April 1997, recommending that by July 2000 all of the state's retail customers should be able to select their electric power suppliers, and that rate reductions of from five to ten percent should be implemented during the phase-in of retail competition. The order adopting the Final Report required the four utility monopolies, including PSE&G, to submit three filings to the BPU: a rate unbundling petition involving the manner in which the single, per-kilowatt-hour charge can be separated into component parts; stranded cost filings relating to the utilities' right to recover some portion of the stranded costs that would have been recovered had they continued as regulated monopolies; and the restructuring filings relating to the reorganization of the utilities. The BPU's Final Order addressed PSE&G's submissions and was issued pursuant to the Electric Discount and Energy Competition Act (EDECA).
An appeal from the Final Order was taken by the Division of the Ratepayer Advocate (Ratepayer Advocate), New Jersey Business Users (NJBUS), a group of large industrial and commercial customers, and Co- Steel Raritan (Co-Steel), one of PSE&G's largest commercial customers. The Appellate Division upheld both the BPU's Final Order and BSCRO. In re PSE&G Co.'s Rate Unbundling, Stranded Costs and Restructuring Filings, 330 N.J. Super. 65 (2000).
The Court granted the petitions for certification filed by the Ratepayer Advocate and NJBUS, and granted in part the petition of Co-Steel, limited to the issues concerning rate reduction. Following arguments on November 8, 2000, this Court issued an Order affirming without an accompanying opinion because of the need for an expeditious resolution of plaintiffs' challenge. The Court relies substantially on the reasons expressed in Judge King's thorough and well-reasoned opinion.
HELD: The BPU's Final Order reflects findings that are supported by the record and are consistent with the enabling legislation.
1. The Legislature has endowed the BPU with broad power to regulate public utilities and considerable discretion in exercising those powers. The BPU's rulings are entitled to presumptive validity and will not be disturbed unless there is a lack of reasonable support in the evidence. Beginning as early as 1995, the BPU held numerous public hearings, solicited comments from the public and interested parties and facilitated negotiation sessions between and among those parties. Following the issuance of the Final Report in 1997, the BPU and an Administrative Law Judge conducted trial-type proceedings, receiving testimony and evidence on PSE&G's filings. The extensive record demonstrates that the Final Order and BSCRO represent the culmination of years of agency review, including negotiations and agreements between PSE&G and others. Under those circumstances, substitution of the Court's judgment for that of the agency is unwarranted unless the Court is firmly convinced - and it is not - that the agency had abused its discretionary powers. (Pp. 4-10)
2. The dissent contends that the BPU ignored clear statutory language and its own public positions when it ordered the five percent transition rate reduction to be measured from 1999 rates instead of 1997 rates. One provision of the EDECA requires an overall rate reduction of ten percent and expressly makes such a reduction relative to the level of bundled rates in effect on April 30, 1997. Another provision permits the BPU to phase-in this reduction and requires that on the implementation of the plan, the utility must reduce its rates by no less than five percent. Absent from this latter provision, however, is any mention of a benchmark time against which the five percent is to be measured. Contrary to the dissent, the Court concludes that the drafters intentionally left out a measuring date for the initial rate reduction to allow the BPU to exercise its discretion when phasing-in the entire ten percent reduction. The Court therefore holds that BPU's approach is a plausible and permissible interpretation of the legislation, well within the discretion of the agency. (Pp. 10-14)
3. The BPU acted within its discretion in allowing PSE&G to accelerate the amortization of its excess depreciation reserve. The EDECA gives the BPU the power to authorize alternative accounting methods over the period when sustainable rate reductions are required. The practical result of allowing PSE&G to amortize its excess depreciation reserve is to soften the financial blow of the required reductions. (Pp. 14-17)
4. There is substantial evidence in the record to support the BPU's findings on valuation of stranded costs, and those findings are consistent with the EDECA. The BPU's stranded costs determination involves complex valuation formulas and accounting concepts, which are exactly the type of decisions best left to the agency's expertise. Further, the process undertaken by the BPU afforded ample opportunity to the parties to comment and present their cases. There was no procedural infirmity that would compel a remand for additional hearings. (Pp. 17-21)
5. The Court is not unmindful of the impacts of rate deregulation in California. But the Court is not ruling on the wisdom of the EDECA. That is for the legislative and executive branches of government, and they have chosen their course. (Pp. 21-24)
Judgment of the Appellate Division is AFFIRMED.
JUSTICE STEIN, concurring in part and dissenting in part, rejects the contention that the Final Order must stand or fall as an integrated and indivisible unit, concluding that the constitutional obligation of judicial review is disserved and frustrated if the Court must ignore illegal and invalid components to preserve the claimed practical benefits of an integrated Final Order. Justice Stein disagrees with the Court's ruling on three issues, and would find that: the EDECA mandates the five percent initial rate reduction must be calculated from rates in effect in April 30, 1997; there is insubstantial support for PSE&G's accelerated amortization of depreciation; and the evidence was insufficient to support BPU's asset valuation and stranded cost determination.
CHIEF JUSTICE PORITZ and JUSTICES COLEMAN, LONG, and VERNIERO join in the Court's opinion. JUSTICE STEIN has filed a separate opinion, concurring in part and dissenting in part. JUSTICES LaVECCHIA and ZAZZALI did not participate.
Phyllis J. Kessler argued the cause for appellant New Jersey Business Users (Kudman Trachten Kessler Newman & Rich and Goldberg, Mufson & Spar, attorneys; Ms. Kessler and Jeffery L. Kantowitz, on the briefs).
Blossom A. Peretz, Ratepayer Advocate, and Gregory Eisenstark, Deputy Ratepayer Advocate, argued the cause for appellant Division of the Ratepayer Advocate (Ms. Peretz, attorney; Mr. Eisenstark, Diane Schulze, Assistant Deputy Ratepayer Advocate and Nusha Wyner, Kurt S. Lewandowski and Ami Morita, Deputy Ratepayer Advocates, on the briefs).
Philip L. Chabot, Jr., a member of the District of Columbia bar, argued the cause for appellant Co-Steel Raritan (Pearson and Shapiro, attorneys).
Helene S. Wallenstein, Senior Deputy Attorney General, argued the cause for respondent New Jersey Board of Public Utilities (John J. Farmer, Jr., Attorney General of New Jersey, attorney; Andrea M. Silkowitz, Assistant Attorney General, of counsel).
John A. Hoffman argued the cause for respondent Public Service Electric and Gas Company (Francis E. Delany, Jr., Corporate Rate Counsel and Wilentz, Goldman & Spitzer, attorneys; Mr. Hoffman, Mr. Delany,James T. Foran, R. Edwin Selover, Anne S. Babineau and Matthew M. Weissman, of counsel and on the briefs).
James E. McGuire argued the cause for respondent New Jersey Commercial Users (Reed Smith Shaw & McClay, attorneys).
Gerald W. Conway argued the cause for respondent Jersey Central Power & Light Company, d/b/a GPU Energy (Thelen Reid & Priest, attorneys; Mr. Conway and Marc B. Lasky, of counsel; Pauline Foley, on the brief).
William Harla argued the cause for respondent Independent Energy Producers of New Jersey (DeCotiis, Fitzpatrick,...
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